Revied GM starts expansion in Asia
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Although it is still struggling with paying back debt in the West, the revived General Motors has started further expansion in the East, under a new cooperation model with its Chinese partner.
Earlier this month, General Motors Co and Shanghai Automotive Industry Corporation Group (SAIC) jointly announced that they had agreed to expand their long-time cooperation in the Asia region, outside China.
GM and SAIC, which currently operate eight joint ventures in China, have formed a new 50-50 investment company, General Motors SAIC Investment Ltd, in Hong Kong to facilitate their expansion efforts.
They also announced plans to leverage their resources to support expansion in emerging markets, beginning with India.
"Changes in the worldwide economy have created new opportunities in emerging markets," said Hu Maoyuan, chairman of SAIC. "By leveraging our individual assets and those of our China joint ventures, SAIC and GM are in a strong position to introduce competitive products outside China that will satisfy the needs of consumers in India and other high-potential global markets."
Based on the automotive industry's long-term potential for growth in India, SAIC and GM have formulated a joint strategy for investment in the country.
"Over the past decade, SAIC and GM have created one of the world's most successful automotive industry partnerships," said Nick Reilly, president of GM Europe, the former president of GM International Operations, which is based in Shanghai.
"Both companies felt this was the proper time to deepen cooperation beyond China's borders in order to enhance our partnership as part of our individual companies' long-term growth strategies."
Both companies also reached an agreement for GM to transfer 1 percent of its stake in Shanghai GM to SAIC Motor.
"This will assist China's leading listed automotive company in consolidating Shanghai GM revenue into SAIC Motor, which will provide investors with a clear understanding of its business. Shanghai GM management will continue to operate with the existing joint management structure and oversee operations of the joint venture," said Kevin Wale, president and managing director of GM China Group.
According to Wale, choosing India to start the Sino-US auto cooperation between GM and SAIC, is not only a perspective on the huge potential of the Indian market, but also a consideration that the current Indian market is quite similar to the Chinese market six or seven years ago.
"Based on the cooperation in Indian market, we both will look for more opportunities in other emerging markets in Asia, which now has a relatively low capacity of vehicles, but high demand for low-price small cars and minivans," said Wale.
GM and SAIC will utilize GM's two vehicle manufacturing facilities and a powertrain facility in India and GM's nationwide distribution network in the formation of a new joint venture.
Small cars from Shanghai GM and mini-commercial vehicles from SAIC-GM-Wuling, SAIC and GM's manufacturing joint ventures in China, will be produced and sold in India.
These products will join GM's global vehicles, allowing GM India to quickly add entries in growing market segments.
The establishment of the India joint venture is expected to be finalized in the first quarter of 2010. GM believes the additional models and potential volume growth will result in the creation of more jobs in India.
"It will be a win-win situation for both of us to expand in the Indian market, not only to increase GM's local market share, which is only 3.5 percent now, but also to boost Shanghai GM's business by exporting more products from China to India," said Wale.
